Bollywood firm Eros’s sponsors in the UK are left in the lurch
- Company taken to court in London and under investigation in India
- Bonds are trading at an artificially low rate on the London Stock Exchange
- Eros launched a £50m seven-year bond issue in 2014, paying 6.5% annual interest
Beleaguered British investors in the Bollywood film group Eros have been dealt a triple whammy.
The company is on trial in London and is under investigation by the Modi government in India. To top it off, its bonds are trading at an artificially low rate on the London Stock Exchange.
Eros launched a £50m seven-year bond issue in 2014, paying a generous 6.5 per cent annual interest. Hordes of savers subscribed at a price of £1.
But the company fell into trouble during the pandemic and has yet to recover. It recently restructured its bonds so they don’t mature until 2026.
Under terms announced in March, Eros, run by the wealthy London-based Lulla family, offered to buy back up to half of its bonds at 60 percent of their value, raise interest to 9 percent and push back the date on which the funds need to be repaid.
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Hundreds of bondholders agreed, but the Lullas later changed their minds, offering to buy just £2m worth of bonds and postponing payment until the following March. The news sent Eros bond prices falling to 16 pence.
Pressure has mounted on the deal following news that Indian regulators are investigating the company’s accounts and have barred several directors from holding office.
Investors face even bigger losses because Eros bonds are traded as if the company will not pay interest when due in October.
The traders’ decision highlights the market’s disappointment with Eros and means investors stand to lose hundreds of pounds in unpaid interest if they decide to sell their bonds.
Bondholders who agreed to the restructuring earlier this year don’t even have that option, as their bonds have been frozen since April.
Eros has now agreed in principle to allow investors to repossess their bonds, but the seemingly unprecedented process is still unresolved.
An action group is being formed to fight for investor rights, but the saga took a new turn last week when the Bank of India, which lent substantial sums to Eros, filed suit against the company in the Commercial Court of India. London Circuit. Just a few days earlier, India’s Ministry of Corporate Affairs ordered an inspection of Eros’s accounts.
When asked for comment, Eros admitted that he was being sued in London, but denied claims that he is acting against the best interests of bondholders.